NEW DELHI: The government may prefer to provide a fiscal push once uncertainty over the Covid-19 pandemic declines with the arrival of a vaccine, chief economic adviser Krishnamurthy Subramanian said on Wednesday, while stressing the importance of counter-cyclical policies.
“I will emphasise again that the government is willing to do what is necessary in terms of government spending, but the timing of this is extremely important. Now that there is news coming that vaccine may not be actually very far off, once we have the vaccine then the uncertainty that people have will go down significantly. And till we have the uncertainty, even if people have money in their pockets, they may actually decide to keep that in their banks as saving accounts, and that’s what I was referring to about the increase in PMJDY (Jan Dhan) accounts by about Rs 20,000 crore,” Subramanian said at a webinar organised by Ficci.
“The question is not about if, the question is about when, and I think the right point would be that if the vaccine comes through in the next few months and thereby the uncertainty goes down, I think the time would be very right for a fiscal push which will generate the demand even for discretionary items … counter-cyclical fiscal policy is important, but the timing is also as important to ensure that the bang for the buck is maximised,” Subramanian said, while answering on the need for a fiscal push to help boost growth. The government has unveiled a series of measures and reforms to overcome the devastating impact of the pandemic.
But in recent weeks, there have been demands for another fiscal push to boost economic activity. Prime Minister Narendra Modi’s top economic advisers have proposed an investment-led stimulus to help revive the economy. Finance minister Nirmala Sitharaman has also said that the government is ready to take more steps in the future to revive growth.
Subramanian said the problem of non-performing assets was holding back the banking sector and called for using fintech to improve the quality of lending. “We can’t become the third-largest economy with the health of the banking system that we have,” Subramanian said.


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